ECON MacroCHAPTER 1 PROBLEMSLO

ECON MacroCHAPTER 1 PROBLEMSLO1 ? Explain the economic problem of scarce resources and unlimited wants1.1. (Definition of Economics) What determines whether or not a resource is scarce? Why is the concept of scarcity important to the definition of economics?LO2 ? Describe the forces that shape economic choices2.1. (Rational Self-Interest) Discuss (check midcourse.net for the help you need) the impact of rational self-interest on each of the following decisions:a. Whether to attend college full time or enter the workforce full timeb. Whether to buy a new textbook or a used onec. Whether to attend a local college or an out-of-town college2.2. (Rational Self-Interest) If behavior is governed by rational self-interest, why do people make charitable contributions of time and money?2.3. (Marginal Analysis) The owner of a small pizzeria is deciding whether to increase the radius of delivery area by one mile. What considerations must be taken into account if such a decision is to increase profitability?2.4. (Time and Information) It is often costly to obtain the information necessary to make good decisions. Yet your own interests can be best served by rationally weighing all options available to you. This requires informed decision making. Does this mean that making uninformed decisions is irrational? How do you determine how much information is the right amount?LO3 ? Explain the relationship between economic theory and economic reality3.1. (Role of Theory) What good is economic theory if it can?t predict the behavior of a specific individual?LO4 ? Identify some pitfalls of economic analysis4.1. (Pitfalls of Economic Analysis) Review the Discuss (check midcourse.net for the help you need)ion of pitfalls in economic thinking in this chapter. Then identify the fallacy, or mistake in thinking, in each of the following statements:a. Raising taxes always increases government revenues.b. Whenever there is a recession, imports decrease. Therefore, to stop a recession, we should increase imports.c. Raising the tariff on imported steel helps the U.S. steel industry. Therefore, the entire economy is helped.d. Gold sells for about $625 per ounce. Therefore, the U.S. government could sell all the gold in Fort Knox at $625 per ounce and reduce the national debt.4.2. (Association Versus Causation) Suppose I observe that communities with lots of doctors tend to have relatively high rates of illness. I conclude that doctors cause illness. What?s wrong with this reasoning?LO5? Describe several reasons to study economics5.1. (Studying Economics) According to the text, economics majors on average make more money than most other majors and have more job opportunities. Are these the primary motivations one might have for studying economics? What are your motivations for studying economics?.

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